(Bloomberg) — Sycamore Partners offloaded wine company Ste. Michelle Wine Estates in a deal that foisted losses on the private equity firm and the company’s lenders as the industry faces tariff pressures and slumping demand from younger consumers.
Sycamore’s sale of the business to the Wyckoff family failed to cover Ste. Michelle’s outstanding debt, resulting in losses for lenders, according to people familiar with the matter who asked not to be identified discussing private information.
Sycamore bought Ste. Michelle — which has wineries across the Pacific Northwest — from Altria Group for about $1.2 billion in 2021, touting its “tremendous potential” for growth. But the industry has been mired in challenges, from a “sober curious” shift toward alcohol moderation particularly among Millennial and Gen Z customers, to a glut of excess inventory and strains from tariffs.
Representatives for Sycamore and Ste. Michelle declined to comment on the terms of the deal. A representative at Coventry Vale Winery, which is owned by the Wyckoff family and based in Grandview, Washington, referred inquiries to Ste. Michelle.
As the industry’s pressures ate into Ste. Michelle’s earnings, Sycamore and its lenders entered into restructuring talks and opted for a sale rather than injecting more money into the business, the people said, asking not to be identified discussing private information.
The transaction also follows Sycamore’s $10 billion agreement to acquire Walgreens Boots Alliance Inc. earlier this year.
With wineries spanning Washington, Oregon and California, Ste. Michelle is the largest wine company in the Pacific Northwest and the third-largest premium wine company in the US, according to Sycamore’s statement when it struck its deal to buy the firm.
Challenges in the wine industry have affected winemakers globally, leading lenders including Bain Capital and Sona Asset Management to take over distressed Australian wine producer Accolade Wines as part of a debt restructuring last year. Vineyards in Europe have also been hit by changing tastes.
